Some households are being charged more than double the regulated benchmark price for electricity, fuelling claims that Australia's energy consumer protections are failing and need to be overhauled.

Despite energy watchdogs cutting the so-called default market offer (DMO) in most jurisdictions this year, a number of electricity users have reported receiving double-digit bill increases in recent weeks.

Among them is one customer from South Australia whose new costs are an "estimated" 103 per cent above the default offer, otherwise known as the government reference price.

Others have been hit with eye-popping bill increases of more than an estimated $1,000 a year.

Retailers have rejected any suggestion they are overcharging consumers, pointing out that profit margins in the industry are thin.

They also noted the long-term, underlying costs of energy bills were rising, despite a big fall in the wholesale cost of generating electricity over the past two years.

Driving the structural increase in prices, retailers argued, were the huge sums of money being invested in new-generation assets needed to replace existing coal-fired power plants.

On top of this were major expansions of the poles-and-wires networks around the country, they said.

Joel Gibson, a director at consumer advocacy group One Big Switch, said it beggared belief that some bills were rising so sharply at a time of falling wholesale electricity prices.

"We've been told that power prices are supposedly coming down this year," Mr Gibson said.

A price 'cap' more in name?

Under decisions made by the energy regulators in May, benchmark prices in New South Wales, Victoria and South Australia fell up to 7 per cent from July.

They rose slightly in Queensland.

At the time, the Australian Energy Regulator (AER) cited the significant fall in wholesale power prices since the heights of the energy crisis in 2022, when coal and gas costs went through the roof.

The regulator said the default offers protected consumers by providing a "cap" on the price retailers could charge customers who subscribed.

But Mr Gibson noted that fewer than one in 10 residential customers were on the default offer, meaning most were exposed to the open market.

And it was here that he said too many consumers were being let down, prompting him to query whether there needed to be a revamp of safeguards in the market.

"Five years ago, the government completely rejigged the retail energy market, supposedly to protect the most vulnerable households in the country from being price-gouged," he said.

"Here we are five years and millions of dollars later and I don't think we're any better off.

"Some households, because they haven't actively engaged with the market, are right now — based on the evidence we have seen — paying double the government reference price or $1,000 more than they have to.

Questions about the adequacy of benchmark prices have become more commonplace since a report from the consumer watchdog last year found big numbers of electricity users were being charged higher rates.

Default offer a safety net: AER

The Australian Competition and Consumer Commission found almost half of customers in 2023 were paying a price equal to or above the default rate across the national electricity market, which covers the eastern seaboard.

It was particularly high in South Australia, where 61 per cent of consumers were on plans that were equal to or above the reference price.

In response to questions, the AER stood by the design of the default market offer (DMO), saying it was there to provide a "safety net" for customers unwilling or unable to engage with the market.

A spokeswoman for the regulator said about 9 per cent of households and 18 per cent of small businesses were on a default offer.

However, the spokeswoman said all retailers were required to make a standing offer available.

"The DMO is also a reference price to compare energy deals," the spokeswoman said.

"This helps customers more simply compare the price of different offers.

"Customers can ask their current retailer to put them on a standing offer if they wish and their retailer must do so.

"The DMO protects consumers from unjustifiably high prices, while allowing retailers to recover their costs."

A spokesman for French-owned retailer Engie, whose customer is being charged an estimated price 103 per cent above the benchmark, said many factors contributed to price discrepancies.

Retailers defend 'tiny' profits

The spokesman said the particular affected customer was given a price increase of 15 per cent from August, suggesting other reasons such as changes in consumption, discounts or solar output might have also played a part.

"Like all electricity retailers, we notify customers of differences between market rates and default rates so they can make informed choices about accessing an offer that best suits them," the spokesman said.

"While this is only an estimate, it appears that this customer would be significantly better off on the DMO and they're welcome to take it up at any time if they choose.

"We're also concerned that the DMO in South Australia does not accurately reflect the true costs or risks of retailing in that state."

Small retailer Globird, which gave one customer a bill increase estimated at more than $700 a year, made similar comments.

Executive manager John McCluskey said it was likely the affected customer was on a market offer with a discount that had expired.

Mr McCluskey said offers made by retailers to win new customers were often on "tiny margins" – or were even made below cost – and it was unfair to compare them with default offers.

"I know it's tempting to assume the retailer is evil or greedy, but we work on very tiny margins, and we never increase the rate unless it is absolutely necessary," Mr McCluskey said.

"We think that so long as the retailer is only taking a minuscule margin, rates are reasonable."

System 'failing' too many

Ross Womersley, the boss of the South Australian Council of Social Service, said it seemed clear the default pricing system was failing consumers, especially poorer and more vulnerable ones.

Mr Womersley queried why customers could not be automatically shifted onto the "cheapest price available" from a retailer when their contracts expired.

In the absence of such reforms, he said too many people would continue to pay too high a price for power – an essential service.

"It's clear that the DMO has limited effectiveness as a price cap and reference price," Mr Womersley said.

"South Australians — particularly those on low incomes or experiencing hardship — need additional energy market pricing and contract protections.

Mr Gibson from One Big Switch said reforms were needed, arguing the default market offer was failing to properly protect enough consumers.

He said it was unacceptable that a retailer could "move you on to any price above the government reference price if they notify you in writing first [when] you're on a market offer".

"The reality is the DMO only applies now to 10 per cent of households," Mr Gibson said.

"The rest of us are on market offers and, as we've seen, there's a loophole in this legislation you can drive a fire truck through.

"Some retailers have been doing that and some householders are really paying the price.

"So, there's a real issue here which we need to address."